News

Chemical Suppliers, Paint Manufacturers Release Earnings Reports

The tentacles of global economic recession have reached the chemical and paint industries. The latest earnings reports among the majors reflect softening industrial demand.

How some players fared this past quarter:

PPG Industries, Inc., which supplies paints, coatings, and optical products, said its fourth-quarter profit fell 64% as the "rapid deterioration in the global economy" slashed volumes in several segments. For the three months ending Dec. 31, net income fell to $71 million, or 43 cents per share, from $200 million, or $1.21 per share, in the year-earlier period. Revenue climbed 3% to $3.19 billion, less than the $3.52 billion analysts expected. Sales of PPG's Industrial Coatings segment fell $166 million, or 18%, mostly on lower volumes in the automotive original equipment manufacturers coatings and industrial coatings businesses, reflecting the severe declines in global demand.

In light of falling demand, PPG announced late last month that it may cut nearly1,000 jobs—or approximately 10% of its workforce—because of weak global demand from automakers and homebuilders, according to Charles E. Bunch, CEO. The company is also considering boosting cuts to as many as 4,500 employees. “We are probably looking at the sharpest downturn that anyone working at our company has seen,” Bunch told reporters in New York recently. “The regions outside of North America, which had been really helping PPG in the first three quarters of last year, have sort of caught the disease that started here in the U.S. with the credit crisis.”

U.S. auto market weakness worsened in the fourth quarter and spread to Europe and Asia, Bunch noted. Global auto production may drop 10% this year, including declines of 20% in North America and 10% in Europe, he said. “We are looking at a difficult first half,” Bunch said.

Sherwin-Williams reported fourth-quarter net income of $50.1 million, down 50% from the year-ago period, on sales of $1.69 billion, which are down 8%. Profits fell in paint stores, consumer group, and global finishes. Consolidated net sales for the year totalled $9.8 billion, down 0.3% compared with 2007. "During the first nine months of 2008, the unprecedented downturn in the U.S. housing market severely depressed paint demand in the domestic new residential, residential repaint, and DIY markets," said Christopher Connor, chairman and CEO. "During the fourth quarter, the demand contraction in the end markets we serve became more severe and widespread as the U.S. economy rapidly deteriorated further and global economies weakened.”

DuPont Co., the third-biggest U.S. chemical maker, reported a fourth-quarter net loss of $629 million and cut its profit forecast range as the slowing global economy reduced demand for construction and automotive products. The loss on a per-share basis was 70 cents, compared with net income of $545 million, or 60 cents a share, a year earlier. The loss, excluding items, was wider than expected, and the 2009 profit forecast range was reduced by 25 cents a share.

Chief Executive Officer Ellen Kullman, who took over the position on Jan. 1, is facing slumping demand that prompted the company to shut plants and eliminate 2,500 jobs. Sales tumbled 17% to $5.82 billion, led by declines in the coatings unit and performance materials, which makes plastics for car parts. DuPont’s sales decline reflects 7% higher global prices and 20% lower demand.

For the final quarter of 2008, volume dropped 22% in the United States and 20% in the Asia Pacific region, with 19% declines in Europe and the Canada-Latin America region. "DuPont enters 2009 addressing challenging economic conditions head-on," Kullman said. "We are intensely focused on productivity, while generating earnings and cash. We do not underestimate the difficulties presented by the current environment."

AkzoNobel, the world’s largest coatings supplier, said its decorative paints business unit reported 4% growth in Q3, 2008, the latest period for which financial information is available from the company. (Note: The company noted that 1% of that growth came from the acquisition of Barloworld in South Africa, while Asia and Latin America continued to demonstrate strong double-digit growth.) Revenue from its European business increased, despite the volume drop in the U.K. market. Meanwhile, the performance in the U.S. was impacted by the continued soft trading environment with weak construction markets. Its Decorative Paints division achieved 1.413 billion euro in sales ($1.802 billion) in Q3 2008 (up 5%), with the Performance Coatings division (also up 5%) taking in 1,138 billion euro ($1.452 billion). The Specialty Chemicals Division (up 9%) generated 1,212 billion euros ($1.546 billion) on revenues during the period.

Rohm & Haas Co.’s fourth-quarter net income plunged 82%, hurt by falling demand and restructuring charges, along with the rest of the bellwether chemical industry. The producer of paint additives reported net income of $32 million, or $0.17 a share, down from $180 million, or $0.91 a share, a year earlier. Net sales fell 13% to $2.03 billion as market declines hurt all its businesses, with the exception of salt. The company had forecast fourth-quarter charges of $90 million as it adjusted production schedules. Three weeks ago, Rohm & Haas announced a plan to cut 5.7% of its work force, or 900 positions, on top of 925 job cuts announced in June, in a move to cut costs. It also imposed a freeze on salaries and discretionary spending. The combined moves are expected to produce pretax savings of $200 million in 2010, with $90 million in savings coming from the latest cuts.

Comment on this article

Our website uses cookies. Cookies enable us to provide the best experience possible and help us understand how customers
use our website.Our site won't work without them. By continuing to use our website you accept our use of cookies.
Find out more about cookies×